Employment Effects of On-the-Job Human Capital Acquisition

IEB Working Paper N. 2018/05

38 Pages Posted: 20 Mar 2018

See all articles by Joaquín Naval

Joaquín Naval

University of Girona - Department of Economics

José I. Silva

University of Girona

Javier Vázquez-Grenno

University of Barcelona; University of Barcelona - Institut d'Economia de Barcelona (IEB)

Date Written: March 14, 2018

Abstract

This paper quantifies the joint effect of on-the-job training and workers' on-the-job learning decisions on aggregate employment. We present an Index of On-the-job Human Capital Acquisition (OJHCA), based on data from the OECD Program for the International Assessment of Adult Competencies. The objective of the index is to capture both formal and informal learning in the workplace. We document a strong positive association between the two components of our index, i.e., on-the-job training and on-the-job learning. We also show that the index is positively correlated with employment across OECD economies. To explain these stylized facts, we build a search and matching model with on-the-job human capital acquisition that depends on both on-the-job training provided by firms and on the workers' level of on-the-job learning. We calibrate the model to the Canadian economy and adjust the learning and training marginal costs to match cross-country levels in the human capital index. We compare the model's predictions with the data and we conclude that differences in marginal costs are necessary to match the differences observed in employment rates across countries. We also extend the model including payroll taxes and education. The model is able to reproduce the observed differences in employment rates between countries with the highest and the lowest level of OJHCA.

Keywords: employment, labor productivity, human capital, search and matching

JEL Classification: E24, J24, J64

Suggested Citation

Naval, Joaquín and Silva, José I. and Vázquez-Grenno, Javier, Employment Effects of On-the-Job Human Capital Acquisition (March 14, 2018). IEB Working Paper N. 2018/05, Available at SSRN: https://ssrn.com/abstract=3141249 or http://dx.doi.org/10.2139/ssrn.3141249

Joaquín Naval

University of Girona - Department of Economics ( email )

Campus de Montilivi
Girona, Girona 17003
Spain

José I. Silva

University of Girona ( email )

Carrer de la Universitat de Girona, 10
Departament d'Economia
Girona, Girona 17003
Spain

Javier Vázquez-Grenno (Contact Author)

University of Barcelona ( email )

Gran Via de les Corts Catalanes, 585
Barcelona, 08007
Spain

University of Barcelona - Institut d'Economia de Barcelona (IEB) ( email )

c/ Tinent Coronel Valenzuela, 1-11
Barcelona, 08034
Spain

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